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FEATURED! Supreme Court: Online shoppers can be forced to pay sales tax

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High Court: Online shoppers can be forced to pay sales tax

We'll have to wait for the full text and analysis to come out in the next few days, but preliminary scans of the news from my perspective say it looks GREAT for sellers as the platforms and not the sellers will be required by the States to enforce tax collections.

This is a placeholder, but please add to this with any relevant updates or commentary.
 

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I am not seeing anything positive in this. The states get more revenue, small retailers are hurting, fewer online sales, large retailers on average are unaffected.

Will there be an exception for small retailers, like in the 2016 South Dakota's law?
We'll have to see a detailed analysis which should come out over the next few days.
 
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Norquist Statement on South Dakota v. Wayfair

Today, Americans for Tax Reform President Grover Norquist issued the following statement on the South Dakota v. Wayfair decision:

"Today the Supreme Court said 'yes—you can be taxed by politicians you do not elect and who act knowing you are powerless to object.' This power can now be used to export sales taxes, personal and corporate income taxes, and opens the door for the European Union to export its tax burden onto American businesses—as they have been demanding.

If physical nexus is no longer required, as the Quill vs. ND case demanded, for sales taxes then it is no longer required for personal or corporate income taxes.

Now, California (or any state or city that loses population through exit) can tax people and businesses who do their best to avoid that state or city.

We fought the American Revolution in large part to oppose the very idea of taxation without representation. Today, the Supreme Court announced, 'oops' governments can now tax those outside their borders—those who have no political power, no vote, no voice."
 
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A quick read from an attorney that I follow said that this didn't resolve the 3P tax issue one way or another.

Now I am curious as to the impact for web site operators.
 

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I think all 4-5 and 5-4 Supreme Court rulings should be automatically and retroactively nullified, all the way down to the beginning of time. If the legal case is as clear as mud, then it should not be up to just 1 random and un-elected person in the country to decide on such matters.
 
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What's going to be the first SaaS to do this for you? Going to be a big winner.
 

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What's going to be the first SaaS to do this for you? Going to be a big winner.
Yup. Then a quiet acquisition by a major platform (like Shopify) to add to their growing list of baked in goodies.

Bad news for consumers, huge time sucks for online retailers. Just a giant cash grab that is just going to be messy from beginning to end.
 

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So I've read through the court opinion, although not all the concurring and dissenting opinions. Some thoughts:

Everyone knew that getting individuals to comply with Use Tax reporting requirements was never going to happen - it's way more efficient to have sellers collect and remit. How many of you, as a consumer, have ever declared Use Tax for something you purchased online and didn't pay sales tax on? My guess is less than 10%.

It also puts everyone on a level playing field, not just between B&M and e-commerce, but between e-commerce and e-commerce. If you live in California, and sell to a California resident, you already have to collect sales tax. What if I come in from PA and sell to a California resident? I can, by default, charge less than you.

I don't see anything in the ruling that indicates collection by the market. For example, if you sell on Amazon, and Amazon does not collect tax for you, that does not absolve you from the requirement to collect and remit once you hit the sales threshold. I know some states require it at the "Amazon level," but not all.
I foresee a lot of action in the next couple years. States will update their laws if they haven't already. Major marketplaces will most likely start to facilitate collection in more states. The Streamlined Sales and Use Tax Agreement will probably become more prevalent. Overall, it's going to be a painful couple of years.

Good news: if you're smaller, your exposure is low. Don't be afraid to wait for a notice from the state, but make sure you keep good records in case they over-assess when they finally get you.

More Good News: as far as I can tell, none of this alters the effect of PL 86-272, meaning just because you may have sales tax nexus, that does not mean you have income tax nexus. Two separate things, at least for now.

We'll see additional guidance coming out as things progress.

As always, consult your tax professional before making any major business decisions.
 

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Keeping an eye on this thread. Thankfully my products are tax exempt for the most part. But I’m sure some random municipality doesn’t tax exempt grocery and it could be an issue in the future.
 
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So I've read through the court opinion, although not all the concurring and dissenting opinions. Some thoughts:

Everyone knew that getting individuals to comply with Use Tax reporting requirements was never going to happen - it's way more efficient to have sellers collect and remit. How many of you, as a consumer, have ever declared Use Tax for something you purchased online and didn't pay sales tax on? My guess is less than 10%.

It also puts everyone on a level playing field, not just between B&M and e-commerce, but between e-commerce and e-commerce. If you live in California, and sell to a California resident, you already have to collect sales tax. What if I come in from PA and sell to a California resident? I can, by default, charge less than you.

I don't see anything in the ruling that indicates collection by the market. For example, if you sell on Amazon, and Amazon does not collect tax for you, that does not absolve you from the requirement to collect and remit once you hit the sales threshold. I know some states require it at the "Amazon level," but not all.
I foresee a lot of action in the next couple years. States will update their laws if they haven't already. Major marketplaces will most likely start to facilitate collection in more states. The Streamlined Sales and Use Tax Agreement will probably become more prevalent. Overall, it's going to be a painful couple of years.

Good news: if you're smaller, your exposure is low. Don't be afraid to wait for a notice from the state, but make sure you keep good records in case they over-assess when they finally get you.

More Good News: as far as I can tell, none of this alters the effect of PL 86-272, meaning just because you may have sales tax nexus, that does not mean you have income tax nexus. Two separate things, at least for now.

We'll see additional guidance coming out as things progress.

As always, consult your tax professional before making any major business decisions.
Couple things :

1. If you have sales tax nexus, that means you have a business that is a taxable entity by that State. That's not selective of JUST sales tax. That includes franchise tax, corporate tax, and income tax. There's nothing that would indicate that your taxable entity is just sales tax related.

2. I presume that Congress will have to act, my guess would be to place some type of thresh hold on taxable entities. A small eBay seller is simply not capable of registering, collecting, remitting and filing sales tax for every jurisdiction in the United States. TaxJar doesn't handle regulatory compliance... they're just a spreadsheet and filing service. If Congress doesn't intervene, it will have a deleterious effect on tens of thousands of small businesses.

3. It's NOT a level playing field, as the largest companies have tax departments to handle this. The smallest companies will be complianced right out of business, with an arduous burden not minimized by this foolish decision. It may level the playing field between Amazon and Walmart, but not between the bohemiths and the independents.

4. States not required to have a high thresh hold will gravitate to the money grab. They're not required today to exempt ANYONE. You sell a hammer on eBay to a guy in Idaho? Idaho can say you have to collect and remit sales tax.

5. We have to wait and see the full analysis, but the only thing sure at this point is by Q4 2018 it's not going to look anything like it does in Q2 2018.

I enjoyed reading your analysis.
 
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Keeping an eye on this thread. Thankfully my products are tax exempt for the most part. But I’m sure some random municipality doesn’t tax exempt grocery and it could be an issue in the future.
States that tax groceries (rate if not fully taxed): Alabama, Arkansas (3%), Hawaii, Idaho, Illinois (1%), Kansas, Mississippi, Missouri (1.225%), Oklahoma, South Dakota, Tennessee (5.5%), Utah (1.75%), Virginia (1.5% + 1% local option tax), and West Virginia (5%).
 

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1. If you have sales tax nexus, that means you have a business that is a taxable entity by that State. That's not selective of JUST sales tax. That includes franchise tax, corporate tax, and income tax. There's nothing that would indicate that your taxable entity is just sales tax related.
But this does not mean you have a filing requirement for income tax. Public Law 86-272 still allows you to "Solicit sales of tangible personal property (directly or indirectly)" without creating an income tax filing requirement.

ETA: I do agree with your other points, although the term "level playing field" is open to many interpretations. For example, the remote seller may otherwise have lower overhead than the in-state brick and mortar. I don't think this creates a un-level playing field, it's merely a business advantage. The collection of sales taxes on one entity and not another, when the same good is provided is, in my opinion, an un-level playing field.
That being said, I don't encourage my clients to voluntarily remit sales taxes. We remit only when mandated.
 
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States that tax groceries (rate if not fully taxed): Alabama, Arkansas (3%), Hawaii, Idaho, Illinois (1%), Kansas, Mississippi, Missouri (1.225%), Oklahoma, South Dakota, Tennessee (5.5%), Utah (1.75%), Virginia (1.5% + 1% local option tax), and West Virginia (5%).
Well... shit. Ok, I suddenly became more interested in this law.
 
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Keep in mind also that even though a state like SD has a moderate thresh hold of $100,000 in revenues before required sales tax collection, they have a LOW unit thresh hold of 200 units.

If your ASP is $20, that's only $4,000 in sales. So it's not really shielded for small businesses when it is an either $100,000 or 200 unit trigger.
 

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Keep in mind also that even though a state like SD has a moderate thresh hold of $100,000 in revenues before required sales tax collection, they have a LOW unit thresh hold of 200 units.

If your ASP is $20, that's only $4,000 in sales. So it's not really shielded for small businesses when it is an either $100,000 or 200 unit trigger.
Exactly.

And the worst part: this is one state's threshold. It could be different for literally every state.
 
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Exactly.

And the worst part: this is one state's threshold. It could be different for literally every state.
It WILL be absent of congressional intervention.
 

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Doesn't TaxJar already do this?
Yes, they do. The issue is the filing for each individual state.

If they can solve that issue, file once automatically or whatever the solution is then I don't see any issue.

If I have to file 50 separate sales & usages every month, that will suck.
 
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Yes, they do. The issue is the filing for each individual state.

If they can solve that issue, file once automatically or whatever the solution is then I don't see any issue.

If I have to file 50 separate sales & usages every month, that will suck.
What about franchise tax

Corporate income tax per state

And that stage percentage of state income tax for monies earned as a percent to total
 

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What about franchise tax

Corporate income tax per state

And that stage percentage of state income tax for monies earned as a percent to total
I was referring to the "sales tax" portion which is what this ruling was initially about.

Obviously, this opens Pandora's box to a plethora of other issues.
 

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Don't forget the potential for sales tax audits under 50 different governments.



No surprise. Capitalism slowly but surely being replaced by corporatism.
The more I study this, the more I think it might crush small entrepreneur eCommerce initiatives. It cannot stand. What a bunch of dumbasses.
 

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The more I study this, the more I think it might crush small entrepreneur eCommerce initiatives. It cannot stand. What a bunch of dumbasses.
I believe it's such a mess because Congress essentially left it up to the Courts to decide our commerce rules.

This is one of the very few times I wish the federal government would step in. Let states pick their own rate, but have the rules be the same across the states. Bonus points if the Federal government collects the taxes and remits them back down to the states (that way we only have to fill out one return, and pay one entity).
 

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Woohoo more tax!!

I read somewhere (before this ruling) that the tax only applies to tangible goods. If you have a SaaS that "runs" on your computer but doesn't install, your exempt.
 

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I've been following this today and it I think it sucks. Here is my question though: How will 1000+ taxing entities enforce this on me here in Texas? I pay the franchise tax, state registration (for inspection) for my business, and collect and remit sales tax for Texas customers. How is the State of Ohio going to force me to collect for them? It seems like it's unenforceable for small guys like me.
 

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I've been following this today and it I think it sucks. Here is my question though: How will 1000+ taxing entities enforce this on me here in Texas? I pay the franchise tax, state registration (for inspection) for my business, and collect and remit sales tax for Texas customers. How is the State of Ohio going to force me to collect for them? It seems like it's unenforceable for small guys like me.
How do they even know you sold to someone in Ohio? Hmm...
 

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How do they even know you sold to someone in Ohio? Hmm...
Exactly. It's unenforceable...unless the state governments all make agreements with each other to collect and remit taxes for one another or something draconian like that....
 

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